FRANKFURT (Reuters) - DaimlerChrysler AG DCXGn.DE said on Friday it had completed the sale of an 80 percent stake in its U.S. unit, Chrysler Group, to private equity firm Cerberus Capital Management CBS.UL.
The deal’s closing had been delayed when bankers were forced to postpone a $12 billion syndicated loan to finance the transaction as lenders tightened access to cash in a nervous debt market.
As a result, DaimlerChrysler and Cerberus decided to help with the financing, a move they confirmed on Friday.
“DaimlerChrysler and Cerberus have agreed to support the financing of the majority takeover of Chrysler by Cerberus in light of highly volatile U.S. loan markets,” the German carmaker said.
DaimlerChrysler and Cerberus would subscribe $2 billion of second-lien debt for Chrysler’s automotive business, to be drawn within 12 months and priced at market conditions.
DaimlerChrysler said its portion would be $1.5 billion.
DaimlerChrysler has the right to sell the loan, which has a maturity of seven years, in the credit market, it added.
“DaimlerChrysler’s financing support is a strong sign of its overall determination to make sure that, under the majority of Cerberus, Chrysler has a good start as a successful standalone car company,” the statement said.
The sale marks the first time a private equity firm has taken over a major U.S. automaker.
DaimlerChrysler will be renamed Daimler AG as a result. Its shareholders are to decide on this change at a meeting in Berlin on October 4.
DaimlerChrysler said it would also reduce its board of management to six, with Chrysler Chief Executive Tom LaSorda, Eric Ridenour and Tom Sidlik leaving its board immediately.
LaSorda told employees on Friday in an email that being a closely held company would mean less pressure to generate short-term profits.
“Going private means we can bring a laser-like focus to our business and make the long-term investments needed to compete, free from financial market pressures to generate short-term results,” LaSorda said in the email, which was released to Reuters.
“We also will be more open to new partnerships and alliances, and will be able to move faster to leverage these opportunities to accelerate our growth,” he added.
Chrysler lost $680 million last year and has said it will remain unprofitable until 2008 as it restructures by cutting 13,000 job cuts and closing an assembly plant dedicated to the slow-selling Dodge Durango sport utility vehicle.
Shares in DaimlerChrysler closed 1.1 percent lower at 65.72 euros, broadly in line with Germany’s DAX index.
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